Watch Series

Asia Pacific Watch - June 2017

Japan is our only true core, en-bloc residential market in the region and following from last month’s coverage of important regional demographic trends, in this month’s Watch report we update our view on the Japanese residential markets. In Q1 2017 the macro-economic situation has generally been quite supportive. Notably, the Japanese external sector continued to flourish, with March trade figures revealing a 12% YoY rise in exports, which was the fourth consecutive month of increases and was in no small part thanks to a 16.4% YoY surge in exports to China. Real GDP in Japan is forecast to remain firm in 2017, but inflation, although positive, is still well below the 2% target. Further stimulus and accommodative monetary policy may still be needed in the next few years, in addition to the structural changes: the most difficult element of Abenomics to implement thus far. Circa 1.4% real GDP growth for 2017 and 1.1% for 2018 (Consensus mean forecasts as of May 2017) is expected to generate positive real estate absorption and both rates of growth are above Japan’s 25-year average growth rate. The biggest support to residential rent growth would be wage increases but this continues to disappoint to date. The Tokyo 23 Wards area saw 0.8% residential rental growth YoY as of March 2017 (IPD/Recruit Index), while Kanagawa Prefecture in Greater Tokyo saw 1.4% growth YoY.

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